Stocks recover from a stumble on Wall Street and end higher

Shares rebounded from a midday stumble and closed higher on Thursday, keeping major indices on track for their first weekly gain in four weeks.

The Standard & Poor’s 500 Index ended 0.7% higher after recovering from an initial 0.9% decline. The Dow Jones Industrial Average and Nasdaq Composite each gained 0.6% after ending their own bumpy rides. Indices are on track for a weekly gain after posting losses for the past three weeks.

Wall Street was keeping an eye on interest rates, as was the European Central Bank biggest rate increase of all time to fight inflation. The move is in line with moves by the US Federal Reserve and other central banks.

Investors also heard from Fed Chair Jerome H. Powell, who affirmed the central bank’s commitment to keep interest rates high for as long as necessary to contain inflation.

Traders “were initially surprised at how firm the Fed’s position on fighting inflation remains,” said Sam Stovall, CFRA’s chief investment strategist. “But once investors realized he wasn’t really saying anything other than what he had previously said, markets bounced back.”

The S&P 500 rose 26.31 points to 4,006.18. It’s up 2.1% so far this week.

The Dow swung from a 259-point loss to a 193.24-point gain to close at 31,744.52. The Nasdaq gained 70.23 points to 11,862.13.

Smaller company stocks also gained ground after an initial setback. The Russell 2000 was up 14.90 points, or 0.8%, to 1,846.91.

Stocks have lost ground for most of the past few weeks after the Federal Reserve indicated it will not stop raising interest rates in a bid to slash the highest inflation in decades for the foreseeable future. The interest rate policy of the Fed and other central banks, which also have a strong influence on the stock and bond markets, has moved into the focus of investors.

On the same day that the European Central Bank delivered its big rate hike, Powell told a monetary policy conference hosted by the Cato Institute, a think tank that promotes libertarian ideas, that the Fed will keep rates high “until.” the job is done”. bring inflation back to its 2% target.

“There have been a number of failed attempts to bring inflation under control, which only increases the ultimate cost to society,” Powell said.

The Fed has hiked rates four times already this year, and markets are expecting it to deliver another whopping three-quarters of a percentage point hike at its next meeting in two weeks.

Powell” sounded very resolute in that [Fed’s] Mission to contain inflation, thereby likely giving more credence to the possibility of a 75 basis point hike at the September meeting,” Stovall said.

One of the Fed’s biggest fears is that households and businesses will start keeping inflation high over the long term, which could lead them to buy in ways that create a vicious cycle that makes inflation even harder to shake.

The Fed has been criticized for not taking inflation seriously earlier, and Powell said setting interest rate policy is both an art and a science. A big question remains whether the high inflation ravaging economies around the world is a one-off phenomenon caused by the pandemic, or the start of something more permanent.

Bond yields rose across the board as traders weighed Powell’s comments and the ECB’s rate hike. The two-year Treasury yield, which is trending in line with expectations for Fed action, rose to 3.52% from 3.44%. The 10-year Treasury yield, which drives interest rates on mortgages and other loans, rose to 3.32% from 3.27% late Tuesday.

Healthcare stocks accounted for a large portion of the S&P 500’s gains. Regeneron Pharmaceuticals rose 18.8% after the company and its partner Bayer reported encouraging study data on a drug to treat blindness.

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